Mouse and human epidermal cell cultures and epidermal cell lines are utilized to study mechanisms of epithelial carcinogenesis. Proliferating basal cells are selected by growth in culture medium with reduced concentrations of Ca++. Terminal differentiation is induced by increasing Ca++. Exposure to a variety of initiating carcinogens yields cellular foci which resist Ca++-induced differentiation but are not tumorigenic. Cultured papilloma cells have similar properties. Exposure to retroviruses with an activated ras oncogene induces a marked proliferative-stimulus but only conditional effects on differentiation. To explore altered regulation of specific differentiation proteins during carcinogenesis, keratin genes have been cloned and sequenced and the amino acid sequence of several of the proteins deduced. Transformed cells have an altered program of keratin gene expression. Tumor promoters induce terminal differentiation in some basal cells through a mechanism similar to Ca++ and possibly requiring activation of the phorbol ester receptor. Carcinogen-altered preneoplastic cells are resistant to the differentiation-inducing effects of tumor promoters, but phorbol esters may stimulate DNA synthesis in these cells thereby providing a selective advantage during promotion. In vivo studies indicate that genotoxic carcinogens, but not tumor promoters, can accelerate malignant conversion of benign lesions.